US and England are set to release their bank rate decision Wednesday and Thursday. Economists expect the US to jump to 1.50% while England is expected to rise another 25 basis points to 1.25%. Here is what is going on in both countries' economies and how to trade these currencies prior to the rate decision.
When talking about economic expansion, the United States shows less growth in the past four quarters versus Great Britain. Additionally, England saw a rise in growth while the US experienced a slowdown.
The US's most recent quarter was exceptionally disappointing which is a bullish indicator for the dollar in general because hawkishness could continue. However, with soaring high inflation around the world, it is tough to tell which currency looks for more attractive in the long run. Odds are, USD will continue to be the go-to major, and it is already proving to do so as risk on pairs like euro and pound are sinking lower and lower each day.
Investors might be pricing in higher yields this week for the USD as expectations of a 50 basis point hike this Wednesday are very likely to happen. Our biggest evidence for this is the rampant inflation tumbling through the economy.
The opposite goes for the pound as investors do not seem to be pricing in higher yields today. However, this is not to say that GBP isn't a promising buy. Today's dip could just be setting up for a higher move for the next couple days. The currency holds well against most others except for the dollar and yen so far as it potential is promising.
Setups Pre-Rate Decision
What started off as a concerning open has now paired most of the losses from the day. The pair came back up to the support level after crossing underneath while showing some major rejection from the lows. The 50% fib level looks like additional support which is around the 162.140s.
The euro-dollar pair probably has some more room to run to the downside on this week as we wait for the big rate news. Price could come down to 1.03779 which marks a support zone and a previous bottom which it can bounce from. However, the downtrend could also persist and shove out more sell offs on risk on currencies.
If you stack the pound against the dollar, the dollar prevails. Price has been in a long term downtrend and continues to sink lower after attempts of rallying. GU made a lower low today but still hasn't closed below this level. We might see some mixed behavior in the meantime as both countries are gearing for rate news. A bounce could take price up to the 1.23300s while a break could take price lower towards the 1.20800s.
This morning at 8:30 am Eastern Time, the United States’ Bureau of Economic Analysis released even more bullish USD news. The Core Personal Consumption Expenditures (PCE) Price Index, which measures changes in prices for consumers (excluding volatile food and energy prices), rose more than expected month-over-month. A 0.5% increase was expected for August, with 0.6% […]
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Last week’s selloff was brutal for investors in the US stock market: the Dow Jones Industrial Average closed at its lowest level since late 2020, falling to 29590.41, losing 1.6% on Friday alone. With the S&P 500 currently down a whopping 23% from January’s highs this year, and other indexes close behind percentagewise, stock market […]
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